The impact of European integration on institutional development

Nina Schönfelder and Helmut Wagner

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the speed of institutional development induced by European integration. The hypotheses are the following. The prospect for European countries to join the EU disposes them to strengthen their institutions, so that the speed of institutional development is high. Furthermore, EU Member States preparing for the introduction of the euro have incentives to develop their institutions, but the speed of institutional development is much lower. As soon as Member States introduce the euro, institutional development grinds to a halt, or is even reversed, as there could be incentives to undo reforms. To test these hypotheses, we estimate a dynamic panel data model, in which the institutional development is measured as positive changes in Worldwide Governance Indicators (WGIs). The WGIs are explained by the “status” of the European countries (i.e. being a member of the euro area, a Member State of the EU preparing to adopt the euro, an acceding country, a candidate country, a potential candidate country or none of the above) and additional controls. To sum up the findings, we can confirm a positive effect of prospective EU membership. Being a Member State does not influence the institutional development path. However, for members of the euro area, there is robust evidence for institutional deterioration in one particular area, namely control of corruption.

Keywords: Institutional development; transition economies; European integration; euro area; panel data (search for similar items in EconPapers)
JEL-codes: F55 O43 (search for similar items in EconPapers)
Date: 2015-03-03
New Economics Papers: this item is included in nep-eec and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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